Trade Idea for 02/26/09

Sadly, that could've been it for this countertrend rally. The trendline I drew yesterday on SSO has been broken. But let's see; the market could surprise with another surge upward. The chart would look a lot better if such a surge occurred, or at least a few more days of sideways action; this countertrend move doesn't stick out enough yet, and it's invisible on the weekly chart.

The bears have been salivating lately, and they have proven very effective in shutting down any rally. However, they might be getting worked up over something that's less than the opportunity of a lifetime. How far might the market fall past the November lows? I'm ruling out 400, and I don't think the 660 level is doable either (both figures in terms of S&P 500). When this down leg concludes, we'll finally have completed Primary A, which I had previously thought done in October and then November of last year, but no, it just wouldn't die.

DXO had a good day today, but so near the 50-day moving average; I'm going to tighten stops. We bought everything on last night's list, which paradoxically included two longs and a short, but that's a testament to how volatile a market this is.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DXO	2.01	2.42	+20.4%	2.30	Consider booking profit at the 50-day moving average	Chart
RWM	80.01	79.92	-0.1%	77.27	N/A	Chart
CYBS	12.48	12.33	-1.2%	11.45	N/A	Chart
VMI	45.21	43.05	-4.8%	41.17	Consider selling on a close < 42.88	Chart

Like I said, DXO is so close to the 50-day moving average, and oil needs to correct before it can rise again. So tomorrow's idea is taking a chance on that correction.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
DUG (Ultrashort Oil & Gas)	30.01	26.79	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 02/25/09

One of the craziest days I've experienced, with frequent, wild swings in every direction. The bias has been to the upside the past couple days, but weakly so. For the chart to look "right," there ought to be some more upside left, but who knows how much more. Every single rally has been beaten back down to the trendline (see chart of SSO [Ultra S&P 500] below).


This minor leg up looks and acts like a reluctant rally that can barely stand on its own legs. Although price has the power to blast off in a short amount of time, that only serves to encourage sellers to enter in great numbers, pushing price back down. Oil, on the other hand, has really taken off as of late, and may have a shot at its 50-day moving average. Let's see how high it can climb.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DXO	2.01	2.19	+9.0%	1.92	Consider moving sell-stop up to breakeven	Chart

The long ideas for tomorrow, CYBS and VMI, may be able to get somewhere in the final few days of this upleg, but recognize that this is a difficult environment to trade for any length of time. Don't risk much if you want to give those two ideas a shot, and start looking for the exits if SPY should get above 80-81. Just in case the rally ends prematurely, I'm bringing back RWM.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
RWM (Short Russell 2000)	80.01	76.68	N/A	Chart
CYBS (CyberSource)	12.48	11.45	N/A	Chart
VMI (Valmont)	45.21	42.89	41.17	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Idea for 02/25/09

It looks like we hit the low Monday, and we're in the middle of a rally at the moment. As I mentioned earlier, this rally isn't one to jump on. It's quite nearly at its target already (SPY 80-81). Wednesdays tend to be continuation days, so let's see if that turns out to be the case.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DXO	2.01	2.06	+2.5%	1.79	N/A	Chart

Yesterday's idea UDN looks good for tomorrow.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
UDN (US Dollar Bearish Fund)	24.96	24.55	24.37	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Idea for 02/24/09

I was early in reading that the reversal had occurred Friday, as we gapped up on the open and then slid to new lows. Today's drop increases the pressure for a rally to occur, but also decreases the potential target on the kickback rally. Maybe SPY 80-81 is as high as it could go. The most telling thing today was that the financials, which had led the market lower, didn't make a lower low, even as the other major sectors did. Bank of America, Citigroup and Wells Fargo all closed up on the day. The financials have been leading, so today's consolidation off the low in that sector may lead to a similar turn in the rest of the market. We shall see soon enough.

We sold our short positions for decent returns but left money on the table. We bought DXO. PM hit our buy stop at open, and then trailed for the rest of the day. Because we ignore action in the first minute of trading, PM doesn't appear in the current list of holdings.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DXO	2.01	1.90	-5.6%	1.72	1.79	Chart

Preparing for a volatile day tomorrow. New lows are a possibility, but a reversal can happen at any time. Trade with caution.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
UDN (DB US Dollar Bearish Fund)	24.96	24.62	24.37	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 02/23/09 and Roadmap

So we started what appears to be our relief rally today. I don't know how long it'll last; my guess is between 2 days and 1-1/2 weeks, depending on how furious a rally it ends up being. That is to say, the more furious it is, the shorter in duration it'll be. Let's take a look at the chart of the DIA.

The potential upside from here is 10% or so. After the rally's over, Elliott Wave points to a final descent. Whether it'll be a descent into an abyss or merely to a slightly lower low, is a bridge we'll cross later. The main goal is to catch that move down when it begins. When that move's done, we'll probably see lower 52-week lows in the S&P, but the Nasdaq has a fair chance of being spared that fate. By the way, the new lows will mark the end of the putative Primary A. The possibility that November marked the end of Primary A, to be followed by an a-b-c rally, was killed Tuesday when the Dow broke down. So the good news is, after the descent, we'll have that a-b-c rally to look forward to.

[Interesting the reversal of fortune here. When the October 10 lows were put in, the Nasdaq was the first to violate, followed by the S&P, and the Dow only violated at the November lows. Now the order of strength has been reversed, with the Dow already having violated November, the S&P close to doing so, while the Nasdaq sports an extra cushion of support (January lows) above.]

We sold EWV at open for a nice quick profit. As for the other shorts, a couple ways to play. My official line is to sell them at open Monday, as I believe the market has turned. But if you have a longer time horizon, you can hold them through the market turn. I'll provide stops for that case in the additional guidelines.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
RWM	73.96	76.88	+3.9%	Sell at open	Consider holding through, stop at 67.49	Chart
DOG	75.51	79.92	+5.8%	Sell at open	Consider holding through, stop at 71.89	Chart

As with all the bear market rallies, this upcoming (potential) rally may be relatively hard to trade on the long side. It may be high risk and may require good timing on entry as well as exit because the duration is so short. Chances are, you won't get much of a second chance to sell if the timing on the exit is off. The reward is the feeling of fast money. It's up to you whether you want to even attempt to trade it. Keep risk low if you do.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
DXO (Ultra Crude Oil)	2.01	1.79	1.72	Chart
HP (Helmerich & Payne)	23.71	22.16	N/A	Chart
PM (Philip Morris)	36.06	35.24	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 02/20/09

The silent slide continues, as new 52-week lows are hit in the Dow. The market is in the final stages of heading toward its bottom, and it's in the final stages that the speed picks up. In the coming days, possibly tomorrow, we might get a relief rally (as mentioned yesterday), but such a rally is not an opportunity to go long unless you're planning a 1- or 2-day trade. Let's stick with our short positions.

We were stopped out of PAAS today, and bought EWV. I forgot to check the average volume on EWV, and it's terrible. I should not have highlighted it yesterday; low-volume issues are just too difficult to get into and out of. As such, the official line is to sell EWV tomorrow.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DOG	75.51	78.95	+4.6%	74.22	Consider selling on a close < 77.45	Chart
RWM	73.96	75.85	+2.6%	72.69	Consider selling on a close < 73.66	Chart
EWV	94.14	98.00	+4.0%	SELL	n/a	Chart

Switching gears a bit, I have some counter-trend ideas for tomorrow: long oil and short gold. These have a high risk of failure because they are countertrend, so don't risk a lot. Gold, in particular, may have another leg up left, but DZZ is flashing a friendly setup. Target for both ideas is the 50-day moving average.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
Crude Oil Double Long ETN (DXO)	2.11	1.72	N/A	Chart
Gold Double Short ETN (DZZ)	20.46	19.53	19.23	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Idea for 02/19/09

Today buyers tried to rally off yesterday's slide, but couldn't make much headway. More downside likely—Tuesday's silent collapse certainly portends that. We should get a kickback rally at some point over the course of the next week, but it might happen after further downside, and such a rally might only manage levels that are below today's. So let's stick with our short positions and see where they take us.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DOG	75.51	78.19	+3.5%	74.22	Consider selling on a close < 77.48	Chart
PAAS	17.68	17.38	-1.7%	16.95	N/A	Chart
RWM	73.96	74.64	+1.0%	72.69	Consider selling on a close < 73.10	Chart

One more short idea.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
EWV (Ultrashort MSCI Japan)	94.14	93.10	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Idea for 02/18/09

Nasty gaps down and a close at the lows made this quite the dire Tuesday to start off the week. Today was critical, and the inability of the buyers to make a dent in the market means that the direction for this next move is likely to be lower. I don't know how long this move will take, but the target appears to be a new low for the Dow and S&P, even if it turns out to be marginally lower. At this point, the Nasdaq appears strong enough to stay above its own 52-week lows.

We were stopped out of BEAV and CSR, but we were among the lucky ones in that these did not gap down, allowing us a chance to get out at our stops. For those who have held DOG patiently, your patience is finally paying off, as it gapped high and closed at the day's highs. EFU gapped far too much for it to be included among the current holdings.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DOG	75.51	78.20	+3.6%	74.22	N/A	Chart
PAAS	17.68	17.42	-1.5%	16.95	N/A	Chart

More downside ahead, most likely.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
RWM (Short Russell 2000)	73.94	72.69	69.43	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 02/17/09

I'm getting mixed messages from Friday's action. There wasn't the continuation rally that has typically accompanied a late Thursday surge. Although prices didn't get close to Thursday's lows, all the major averages closed at the day's lows in a vote of no confidence. There were three attempts at rallies, each with lower highs, each time met with selling. The message of the day was "no go." On the other hand, perhaps we needed a day to correct that late Thursday surge. Recall that Wednesday's action was similarly rangebound; there's a kind of symmetry in having a day of rest before and after a move (a potential reverse head and shoulders pattern, see below).


Looking at the somewhat bigger picture, the SPY did not defend that $85 level at all, and it will need to recapture it quickly to retain the bullish look. At this point, price is near the bottom of a trading range that has been in effect since mid-January. If the trading range holds, then a rally should materialize Tuesday, fulfilling the potential of the head and shoulders pattern. But every trading range ends at some point, and that point could be Tuesday on a breakdown. Ominously, the Dow had its lowest close thus far in 2009. The key takeaway for me is mixed messages. Be prepared for the market to break either way on Tuesday, and if that direction happens to be lower, then new 52-week lows in the Dow become a real possibility. Rally instead, and who knows? Maybe SPY 110 in a couple months.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DOG	75.51	75.56	+0.1%	71.39	N/A	Chart
BEAV	10.73	10.73	+0.0%	9.99	N/A	Chart
CSR	5.91	5.51	-6.8%	5.16	Consider selling on a close < 5.33	Chart
PAAS	17.68	17.51	-1.0%	16.04	Consider selling on a close < 16.95	Chart

Up or down? One idea for each possibility.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
GOOG (Google)	365.01	355.22	351.47	Chart
EFU (Ultrashort MSCI EAFE)	115.46	108.68	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 02/13/09

How many times have we seen this—market pushed to the brink late on a Thursday, and then miraculously recovers as a buying panic sets in. This also happened last Thursday. According to the script, we'll rally for two days and then collapse on Tuesday. Only this time, it can't work that way since Monday's a holiday.

There's definitely reluctance for the market to fall below a certain point, but that doesn't mean it can't happen. Still, this is the nature of a B wave rally in a bear market—it will continue to test the limits of price even as it eventually works its way up to the 50% retracement level (SPY 110-ish). It hasn't been a pretty journey, but the fact is that the Nasdaq touched but closed above its rising 50-day moving average, having gained over 20% since its November lows. The Nasdaq picture very much looks like a textbook B wave. Then turn to the Dow chart, which is a horror show, with lower lows each pullback and looking on the brink of collapse. The difference between these two major averages is extreme and unusual. I don't know which one is right, but I don't believe we can have the Nasdaq retrace 50% of its decline, fulfilling its B wave, while the Dow hits a new 52-week low. Something's got to give.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DOG	75.51	74.64	-1.2%	71.39	N/A	Chart
BEAV	10.73	10.78	+0.5%	9.81	N/A	Chart
CSR	5.91	6.03	+2.0%	5.16	Consider selling on a close < 5.58	Chart

Is now the time to be a hero? I'm not sure it is, but if indeed we have the beginning of a rally (whether a mere two-day affair or one that goes and breaks out of the channel), then the following high-risk signals will also have high potential reward. My suggestion is to risk less per idea.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
HOS (Hornbeck Offshore)	17.82	16.49	N/A	Chart
PAAS (Pan American Silver)	17.68	16.95	16.04	Chart
KOL (Market Vectors Coal ETF)	15.31	13.99	N/A	Chart
KRE (Regional Banks ETF)	21.38	19.64	N/A	Chart
DBA (DB Agriculture ETF)	25.03	24.34	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Update 02/12/09

Very volatile day given the narrow trading range. The market is either trying to right itself after yesterday's collapse or taking a breather on the way down. A very encouraging pattern in the Nasdaq would favor the former, but the Dow looks like it's barely hanging on. Oil was hit hard today, and we lost CLR in the carnage.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DOG	75.51	74.61	-1.2%	71.39	N/A	Chart
BEAV	10.73	10.56	-1.6%	9.81	N/A	Chart
CSR	5.91	5.83	-1.4%	5.16	N/A	Chart

For tomorrow, I got nothin'.

Trade Ideas for 02/11/09

Relentless selling today—this was the precipitous drop that always seems to accompany price extension in the bear market. That SPY 85 level caved without a fight, but on the plus side, baseline support has not been violated. We'll have to see, but the B wave remains alive.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DOG	75.51	75.04	-0.6%	71.39	N/A	Chart
BEAV	10.73	10.50	-2.1%	9.81	N/A	Chart
CLR	22.51	21.03	-6.6%	19.87	N/A	Chart
CSR	5.91	5.66	-4.2%	5.16	N/A	Chart

It might take a couple to several days for a rally to develop (assuming one does), but in case it happens tomorrow, a couple charts look well-positioned.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
TLB (Talbot's)	3.06	2.58	N/A	Chart
CME (CME Group)	192.54	175.85	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Idea for 02/10/09

So far, so good. No precipitous drop is a plus! But I'm reserving judgment until we get the first test of that SPY 85 area, and that might happen tomorrow.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DOG	75.51	71.82	-4.9%	70.99	Consider selling on strength	Chart
TBT	48.11	48.62	+1.1%	47.09	The move looks done; consider selling on strength	Chart
BEAV	10.73	11.15	+3.9%	9.81	N/A	Chart
CLR	22.51	22.03	-2.1%	19.87	N/A	Chart
CSR	5.91	6.06	+2.5%	5.16	N/A	Chart

Carrying over yesterday's idea.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
COV (Covidien)	40.16	38.88	38.57	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 02/09/09

Good action Friday in the markets. This could be the start of the market's last hurrah. Of course, since October 10th we've been at a similar point around 7 times, and each time what followed was a precipitous drop rather than a rally. This time, though, looks like it could be for real. While there needs to be a small correction near-term, a pullback to the SPY 85 area looks more like a buying opportunity than a signal to cut losses. The chart of the Dow has been very deceptive, with new lows seemingly every other day since January 20th, while for the other indices, notably the S&P, January 20th has marked a recent low that hasn't been breached.



The likelier possibility now is the final leg of the Primary B wave, rather than new lows. When all is said and done, a price move to around SPY 110 (about +25% from Friday's close) is possible. The key is what happens around that SPY 85 level in the coming days. If it ends up being well-defended, then this rally starts to look very good.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DOG	75.51	71.79	-4.9%	70.99	Consider selling on strength	Chart
TBT	48.11	48.81	+1.5%	47.09	N/A	Chart
BEAV	10.73	11.02	+2.5%	9.81	N/A	Chart
CLR	22.51	22.50	-0.0%	19.87	N/A	Chart

Not many charts have entries because they all overextended themselves Friday. Recent history suggests that they'll come back down soon enough, but this time I hope they show some restraint.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
COV (Covidien)	40.16	39.26	38.57	Chart
CSR (China Security & Surveillance)	5.91	5.57	5.16	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 02/06/09

Sorry for that two-day hiatus. Seems like every day this week Dow gets pushed to the brink yet miraculously bounces back. The Dow is made up of some very questionable "leaders of industry" right now, with GE and WMT around 52-week lows, and that's not even to mention C and BAC. Imagine if a year ago (the date of the last rejiggering), the Dow Jones Co. had decided on GOOG or AAPL for the index (rather than BAC), how much more in line with the S&P it would look today. Yes, both of those names are down, but their -33% beats BAC's -88% any day.

Today's bounce back was fueled by speculation that a new bank bailout plan would be unveiled Monday. If the market can rally on this rumor tomorrow, then the bearish cast to the market might be neutralized. Really, the Dow is a mess but there is a sad little uptrending pattern in the S&P that could forestall the inevitable crash.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DOG	75.51	73.95	-2.1%	70.99	N/A	Chart
TBT	48.11	48.12	+0.0%	45.68	Consider selling on a close < 47.09	Chart

BEAV has held up well on its earnings, so let's give it another spin. Oil and China are also looking perky again.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
CSR (China Security & Surveillance)	5.91	5.49	5.16	Chart
BEAV (BE Aerospace)	10.73	9.81	9.54	Chart
CLR (Continental Resources)	22.51	20.59	19.87	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Update

Chrib had a bout of food poisoning and will need a couple days to recuperate. Sorry for the inconvenience.

Trade Ideas for 02/03/09

The Dow hit the breakdown point but is still hanging on; nevertheless its chart looks pretty awful. On the other hand, the Nasdaq, Russell and even the financials finished positively today. These mixed messages have been playing out in the market since mid-January, and our portfolio has been the worse for it. The market has been bouncing off breakout and breakdown points, range-bound, and our portfolio has been whipsawed back and forth. From prior experience, when this period ends, the next move will be fast, and the challenge is to be positioned properly when that happens.

All our positions were sold early on when the market took a morning fall, and we entered into our Dow short. This position is intended to be longer-term, as the sell-stop coincides with the "all clear" point for the market. In that sense, it'll act as a hedge for any new long positions we take on. You might have noticed that many false moves (e.g., yesterday's buy, today's sales) have taken place in the first 45 minutes of trading each day, and I continue to recommend waiting until 10:15 ET before entering orders.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DOG	75.51	75.10	-0.5%	70.99	N/A	Chart

Time for a bounce, maybe? Let's see if there's anything to be read in the upticks found in the non-Dow averages.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
TBT (Ultrashort 30-Year Bonds)	48.11	45.68	N/A	Chart
DDR (Developers Diversified Re)	5.31	4.55		Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 02/02/09

Well, the sellers left us a little breathing room. While the Dow closed at 8,000 and has less than 100 points left before this little uptrend is considered aborted, the other major indices have a bigger cushion. Thing is, bear markets can surprise; pullbacks go deeper, closer to breakdown points without actually breaking down. Because the bears did leave that bit of breathing room, I can't say that the bullish case is finished. Let's see what February brings.

EXPE was a purchase on a morning fakeout, and ICO and TWE were sold for losses. BEAV was sold for a decent profit in advance of earnings.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
AAPL	90.01	90.13	+1.1%	89.73	N/A	Chart
IVN	3.01	2.70	-10.3%	2.59	N/A	Chart
EXPE	9.44	8.93	-5.4%	8.60	N/A	Chart

One odd thing Friday afternoon was that as financials went down the toilet, the solar sector began to soar. Odd, but noteworthy, so I have a solar idea for Monday. And just to cover the possibility of a breakdown, a short.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
SOL (Renesola)	3.87	3.49	N/A	Chart
IBB (Biotech iShares)	72.01	70.48	N/A	Chart
DOG (Short Dow)	75.51	70.99		Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.